Amazon Supply Chain Disruptions 2020

Online marketplaces have expanded quickly over the past few years catering to the surging demand of buyers by enabling easier and faster purchases. In 2019, Amazon accounted for more than one-third of all US e-commerce sales. It has also penetrated into B2B and B2C sales. Amazon has become a crucial part of our lives. It is an online marketplace used by millions of people across the world. More and more sellers and vendors are looking for ways to enhance their business. However, the impact of COVID-19 is causing disruptions in the entire supply chain of industries, especially in e-commerce and retail. Amazon is no exception. 

Many companies and experts have predicted that the coronavirus pandemic will slim the chances of small and medium-scale businesses. Only a few of them are talking about how Amazon is handling the coronavirus disruptions. Today, let’s take a look at Amazon supply chain disruptions in 2020 amid COVID-19 and how sellers and brands are handling these disruptions. 

Quick Guide:

  1. How Amazon is responding to COVID-19?
  2. How companies are handling the Supply chain risks?
  3. Key Takeaways for Brands
  4. How sellers are responding to the pandemic?
  5. How sellers and brands must respond?
  6. Final thoughts

How is Amazon responding to the COVID-19?

In the midst of COVID-19, businesses need to adapt quickly to the rising demand. The challenges that sellers are being faced are unprecedented. Similarly, Amazon is facing huge demand for essential products such as household items, groceries, and medical supplies including face masks and sanitizers. While it brings a huge revenue for Amazon, the surging demand for these essentials is stressing the Amazon supply chain. 

If Amazon can meet the growing demand, then it has great potential to emerge as one of the powerful beneficiaries.

Amazon is rearranging its logistics to prioritize essential items. This, in turn, is hampering their ability to meet the non-essential products demand such as electronics, children’s toys, and games. On top of that, most of the sellers. Around 50% of the sales on Amazon are attributed to the third-party sellers (Source). Amazon’s decision to prioritize essential items is affecting all these sellers. This decision largely affects the sellers who are relying solely on Amazon to ship products to the customers. The good part of it is that none-FBA sellers aren’t affected by these decisions. It means sellers have the chance to opt for FBM if they want to sell non-essential items. Also, in the recent update, Amazon started to add more products that are eligible for shipment creation. With this a large number of products are eligible to send to fulfillment centers, however, the quantity can be limited for few items. 

Recently, Amazon started to make certain changes in the return window extension and account suspension policy to meet the needs of the sellers. The company is trying to adjust to the current situation depending on the countries and making necessary efforts to balance the business operations of Amazon and its sellers. 

How Companies are Handling Supply Chain Risks?

Digital Transformation is Inevitable

With the movements restricted and supply interruptions, all the industries and businesses are adapting their strategies to evolve with the changing consumer patterns. Brands and sellers are moving their operations into digitization. Though many companies have already adapted to it, coronavirus has pushed the businesses to streamline their online operations. Live-chat or automating end to end processes has been some of them. New processes are evolving overnight and the focus is shifting to try new technologies to speed up the digital transformation. 

This is pushing us to ask: Has COVID-19 accelerated digital transformation?

Is this for good?

Only time will tell.

FMCG item sales are growing rapidly

Sales of FMCG goods are growing rapidly owing to the demand triggered by panicked customers. Customers want to stock up essential goods and commodities during this pandemic. The existing uncertainty around the pandemic is resulting in an uptick of consumer spend in essential commodities. In many countries, governments have eased the manufacturing rules of essential commodities enabling faster clearance with adequate insurance coverage to sustain the business disruptions. 

Will sellers be able to meet this surging demand? Definitely! All you need to do is plan your inventory and stock based on your business model and customer needs. The key to sustaining the current situation is to track the data trends over a period. 

Key Takeaways for Brands

Track your inventory levels

If you are selling an essential item or a non-essential item, no matter how hard you try, there are high chances that the demand is going to outpace supply. You need to know the scope of your inventory levels. Track your outages, this will help you plan your stock levels. Come up with innovative ways to capture demand when the stock levels are low. 

Handle Sponsored ads in a smart way

Amazon sponsored ads allow you to rank better for high volume search terms especially for your brand keywords. This is the time to increase your ad budget as Amazon ads are performing well during this time. However, you need to have enough inventory to fulfill the orders. Also, ensure you track your ad spend and see that the amount stays within your budget. 

Make the best use of your sponsored advertising during the time of uncertainty. You need to be smart and careful while running promotions and advertisements during times of huge demand. There are chances that your product may go out of stock. 

For more information on Amazon advertising during uncertain times, check this video here.

Optimize your listings with the right set of keywords

Product search is changing to a different level. Now is the time to hone in on optimizing your product listings. Revamp your product listings, title, and description. Do your titles and description entice your buyers? Ensure you bring your brand voice to the product page. All these details may appear subtle, but generate an impression on your product.

If you want to learn more about product listing optimization amid COVID-19, take a look at this video here. 

Work together to manage supply chain

When retailers and brands come together, the insufficient supply and high demand products can be handled well. Handle customers’ panic buying by limiting the maximum products ordered. This is implemented across several countries and industries already.

How sellers are responding to the pandemic?

We know that this situation causes panic among sellers on a large scale. While few sellers are worried about the impact of COVID-19 will cripple their supply chain and sales. While others believe that the impact is temporary and much-hyped. On the other hand, there are few opportunistic sellers who are exploring the new product ideas and revamping their existing portfolio. While the responses are mixed, the solution would be to understand the nature of the business and stay connected with your customer. 

How sellers and brands must respond?

While most of the e-commerce and related organizations are using a risk management strategy to face the situation, it is hard for the companies to handle the disruptions as the pandemic is escalating at a rapid pace. Companies require end-to-end assessment, tracking, and optimization. They should have the ability to execute strategies that can mitigate the risk to protect their supply chain and human resources simultaneously.

In order to sustain the current situation and potential disruptions, brands should plan a rapid and timely response to optimize the results and reduce risks. Entrepreneurs and sellers should possess strong data and analytics skills and assess the long-term implications of the supply chain. 

Final Thoughts

The impact of COVID-19 on the supply chain of Amazon as well as on the organizations is not definitely short-term. Businesses need to build long-term resilience within their value chain to prepare themselves for future challenges. Sellers need to take a holistic approach to build sufficient flexibility to protect their business against present and future disruptions. As mentioned a robust and responsive operational ability that is technology-driven achieves end-to-end transparency across their supply chain.